EUS EXECUTIVE UPDATING SERVICE Updating Acts, Ordinances, Statutory Rules & Orders (SROs.) etc.

Transcription

1 EUS EXECUTIVE UPDATING SERVICE Updating Acts, Ordinances, Statutory Rules & Orders (SROs.) etc. III-H 11/21 NAZIMABAD P. O. BOX 2140 KARACHI Ph: (92-21) (NTN: ) EUS UPDATE CVT LEVY & EXEMPTION For EUS Clients Use Only [Capital Value Tax (CVT) Assets, Rates, Exemptions etc. and Allied Matters] CONTENTS (31 Pages/ ) 1. Section 7 of the Finance Act, Useful References Agricultural Land Audit Challan Form/Rules Computerization & Monitoring Exemptions Gift Governments Housing Societies/CVT Wing Leasing/Modaraba Vehicles Pakistan Domestic Sukuk Co. Ltd. Partner/Partnership Firm Power of attorney Provinces Powers Urban Area Land EUS Enclosure CVT Exemptions Immovable Properties Paragraph (CA) before Omission by the Finance Act, 2010 (XVI of 2010) ** * **

2 1. SECTION 7 OF THE FINANCE ACT, 1989 The Capital Value Tax is levied under section 7 of the Finance Act, 1989, which after incorporating amendments, made from time to time, updated to read as follows: 7. Levy of tax on Capital Value of certain assets. (1) A tax on the capital value of assets, to be called the capital value tax, shall be payable by every individual 1 [, association of persons, firm or a company which] acquires by purchase 2 [gift, exchange, 3 [power of attorney] 4 [other than revocable and time bound (not exceeding sixty days) executed between spouses, father and son or daughter, grand parents and grand children, brother and sister], surrender or relinquishment of rights by the owner (whether effected orally or by deed or obtained through court decree) except by inheritance, or gift from spouse, parents, grand parents, a brother and a sister] an asset or a right to the use thereof for more than twenty years 5 [ ], 6 [or renewal of the lease or any premium paid thereon] 7 [ ] 8 [:] 1. AOP, FIRM OR COMPANY Comma and words etc., association of persons, firm or a company which substituted for the word who vide Finance Act, 1990 (VII of 1990). 2. GIFT, EXCHANGE SURRENDER OR RELINQUISHMENT Words etc. inserted vide Finance Act, 1998 (III of 1998). 3. POWER OF ATTORNEY - Words inserted vide Finance Act, SPECIFIED POWER OF ATTORNEY (POA) - Words etc. ins. vide Finance Act, SCOPE OF CAPITAL VALUE TAX: Clarification. An amendment has been made in section 7(1) thru Finance Act, 2007 by virtue of which no CVT is payable in respect of POA, which is revocable and time bound (not exceeding 60 days), and executed between spouses, father and son/daughter, grand parents and grand children or brother and sister [Extract from FBR Circular No. 2 dated ]. 5. AIR TICKET PURCHASE - Words or purchase of an air ticket omitted vide Finance Act, Earlier these words were inserted vide Finance Act, LEASE RENEWAL/PREMIUM - Words inserted vide Finance Act, 2009 (I of 2009). Clarification. Through amendment made in section 7(1), 1989, the scope of levy of CVT has been extended by bringing the renewal of lease or any premium paid thereon in respect of immovable property in the ambit of chargeability of CVT w.e.f [Extract from Paragraph 1(a) of FBR Circular No. 04 of 2009 dated / No.F.1(35)Ex/2009].

3 9 [Provided that in case of a bank, the capital value tax shall be paid when general power of attorney is used to sell the mortgaged property offered as collateral 10 [other than traded] security for obtaining loan.] 11 [Explanation. For the purposes of this section, the expressions 7. SECURITIES In sub-section (1), after the word thereon, the following words etc. [inclusive of those (in brackets) earlier inserted vide Finance Act, 2004 (II of 2004)] omitted by the Finance Act, 2011 (XVI of 2011): [or purchase of modaraba certificate or a registered instrument of redeemable capital as defined in the Companies Ordinance, 1984 (XLVII of 1984), or share of a public company, listed on a registered stock exchange in Pakistan by a resident person defined in section 81 of the Income Tax Ordinance, 2001 (XLIX of 2001)] such as is specified in subsection (2), *[at the rates specified in that sub-section] *CVT Rates (3 rd Amendment at this location) The words at the rates specified in that sub-section substituted for at the at the rates specified in the sub-section vide Finance Act, 1998 (III of 1998). 2 nd Amendment Words at the rates specified in the sub-section substituted for rates specified in sub-section (10) by the Finance Act, 1996 (I of 1996). Inadvertently, the words at the was repeated there in this amendment. 1 st Amendment Words etc. rates specified in sub-section (10) substituted for the words rate of five per cent of the capital value by the Finance Act, 1992 (VII of 1992). 8. Colon substituted for the full-stop at the end vide Finance Act, 2008 (I of 2008). 9. BANK LOAN/MORTGAGE Proviso added vide Finance Act, TRADED SECURITY Substituted for the word or vide Finance Act, 2009 (I of 2009). 1. SCOPE OF CAPITAL VALUE TAX: Clarification. The shares of a public company traded in any registered stock exchange in Pakistan by a resident person has been excluded from the payment of CVT on the trading of said shares w.e.f [Extract from Paragraph 1(b) of FBR Circular No. 04 of 2009 dated /No.F.1(35)Ex/2009]. 11. EXPLANATION comprising of clauses (a) & (b) inserted by the Finance Act, 1990.

4 (a) "association of persons" and "firm" shall have the same meaning as contained in the 12 [Income Tax Ordinance, 2001 (XLIX of 2001)]; and 13 [(b) company shall have the same meaning as defined in the 14 [Income Tax Ordinance, 2001 (XLIX of 2001)] except a local authority;] 15 [(c) "development authority" means an authority formed by or under any law for the purposes of development of an area and includes any authority, society, agency, trust, association or institution declared as development authority by the Central Board of Revenue by a notification in the official Gazette; and] 12. INCOME TAX ORDINANCE, 2001 Substituted for the words etc. Income Tax Ordinance, 1979 (XXXI of 1979) by the Finance Act, COMPANY Clause (b) substituted for the following by the Finance Act, 1992: (b) "company" shall have the same meaning as defined in the Companies Ordinance, 1984 (XLVII of 1984) 14. INCOME TAX ORDINANCE, 2001 Substituted for the words etc. Income Tax Ordinance, 1979 (XXXI of 1979) by the Finance Act, DEVELOPMENT AUTHORITY Clause (c) [alongwith clause (d)] added by the Finance Act, Notification. Following declared to be the development authorities for the purpose of clause (b) of sub-section (2) vide SRO. 645 (I)/92 dated w.e.f : Cantonment Boards (Hyderabad, Karachi, Lahore, Multan, Peshawar, Quetta & Rawalpindi) CDA, Islamabad, DHA, Karachi, FDA, Faisalabad, GDA, Gujranwala, HDA, Hyderabad, KDA, Karachi, Lahore Cantonment Cooperative Housing Society, Lahore, LDA, Lahore, MDA, Multan, Local Bodies Improvement Trusts, PDA, Peshawar, Provincial Departments of Physical Planning & Housing, QDA, Quetta & RDA, Rawalpindi.

5 16 [(d) "registration authority" means the person responsible for registering or attesting the transfer of the asset or of the right to use thereof for more than twenty years, and in the case of a development authority or a co-operative society, its principal officer.] 17 [(e) urban area means area falling within the limits of (i) (iii) the Islamabad Capital Territory; a Cantonment Board; the rating areas as defined under the Urban Immovable Property Act, 1958 (W.P V of 1958) 18 as inforce in Punjab, [KP], Sindh and 16. REGISTRATION AUTHORITY Clause (d) [alongwith clause (c)] added by the Finance Act, URBAN AREA Clause (e) substituted for the following (earlier added by the Finance Act, 2006) vide Finance Act, 2008 (I of 2008): (e) urban area means area falling within the limits of (i) (iii) (iv) (v) (vi) the Islamabad Capital Territory; a cantonment board; or a municipal body; in case of Karachi upto 40 Kilometers from the outer limit of municipal or cantonment limit; in case of Lahore and Faisalabad upto 30 Kilometers from the outer limit of municipal or cantonment limits; in other cases upto 10 Kilometers from the outer limits of municipal bodies or cantonment boards; and (vii) includes areas defined as such in the Urban Immovable Property Tax Act, 1958 (WP Act V of 1958) and such areas as the Central Board of Revenue may, from time to time, by notification in the official Gazette, specify. 18. KHYBER PAKHTUNKHWA Words Balochistan, Khyber Pakhtunkhwa and Sindh substituted for Baluchistan, North West Frontier and Sind by the Constitution (Eighteenth Amendment) Act, 2010 (X

6 Balochistan except where the rate under section 117 of the respective Provincial Local Government Ordinance, 2001 is zero; and (iv) such areas the Federal Board of Revenue may, from time to time, by notification in the official Gazette, specify.] 19 [(2) The assets and the rates referred to in sub-section (1) are: of 2010) dated EUS has changed the expressions accordingly here in the document under review i.e. KP for NWFP. 19. ASSETS Sub-section (2) substituted for the following (duly substituted by the Finance Act, 1992) vide Finance Act, 1996: (2) The assets referred to in sub-section (1) are (a) *[(b) (c) (d) (e) (f) urban immovable property, not being a property to which clauses (b) or (c) apply, with land area exceeding *[two hundred and forty] square yards; non-residential plots of land of any size and residential plots of land with area exceeding two hundred and forty square yards, allotted by a development authority;] urban immovable commercial property; *[residential plots of land with area exceeding two hundred and forty square yards and all other immovable properties] situated between the outer limits of a municipal corporation, municipal committee, cantonment board or Islamabad Capital Territory and the limits of rural areas specified in the Central Board of Revenue *[Circular No. 28 of 1992 (Income Tax), dated the 15 th September, 1992,] for the purpose of tax holiday; motor vehicles, other than a car used in Pakistan, not plying for hire, with engine capacity exceeding 800 cubic centimeters; motor vehicles, being a car previously used in Pakistan with engine capacity exceeding 800 cubic centimeters *[.] *[(g)] Omitted. *Certain words etc. substituted for two hundred and fifty, immovable property and Circular No. 2 of 1992 (Income Tax), dated the 27 th January, 1992, in above mentioned clauses (a) & (d), clause (b) substituted for the following, and clause (g) before omission provided to read as follows vide Finance Act, 1993:

7 Description of asset Rate of CVT percentage of the capital value 20 [(A)] Omitted (b) (g) plots of land with area of not less than two hundred and forty square yards, allotted by a development authority; new shares of public companies quoted on stock exchange the issue of which is over subscribed by fifty per cent or more. Before substitution by the Finance Act, 1992, originally it was provided to read as follows: (2) The assets referred to in sub-section (1) are (a) *[(aa) (b) urban immovable property *[, not being a property to which clause (aa) applies,] with land area exceeding 250 square yards; *[ ] urban immovable commercial property; and] motor vehicle, not plying for hire, with engine capacity exceeding 800 cubic centimeters. * Clause (aa) was inserted by the Finance Act, 1990, and accordingly certain words etc. inserted and word and omitted in clause (a) ibid. 20. IMMOVABLE PROPERTIES CVT Following paragraph (A) [alongwith paragraph (B)] omitted by the Finance Act, 1999: (A) Immovable property (other than residential plots of land with land area upto 240 square yard and flats and apartments with covered area less than 1500 sq. feet) situated in (a) (b) urban area i.e. area falling within the limits of metropolitan corporation, municipal corporation, municipal committee, town committee, cantonment board or the Islamabad Capital Territory; areas between the outer limits of urban areas and the following: *[2.5%] *[2.5%] (i) in case of Karachi upto 40 Kilometers from the municipal or cantonment limits; in case of Lahore, upto 30 Kilometers from the municipal or cantonment limits;

8 21 [(B)] Omitted 22 [(C)] Omitted (iii) in other cases upto 10 Kilometers from the existing limits of municipal bodies or cantonment boards; * Substituted for 5% by the Finance Act, Clarification. CVT on immoveable properties was chargeable under paragraphs (A) & (B) of section 7(2). Through the Finance Act, 1999, said paragraphs (A) & (B) stand omitted. Accordingly, CVT is no more chargeable on registration of immoveable properties [Extract from Circular No. 5 of 1999 dated ]. 21. AGRICULTURAL LANDS CVT Following paragraph (B) [alongwith paragraph (A)] omitted by the Finance Act, 1999: (B) Agricultural land with value of Rs. 200,000 and above, situated in areas other than those specified in paragraph (A) above; * Substituted for 5% by the Finance Act, *[2.5%] Clarification. CVT on immoveable properties was chargeable under paragraphs (A) & (B) of section 7(2). Through the Finance Act, 1999, said paragraphs (A) & (B) stand omitted. Accordingly, CVT is no more chargeable on registration of immoveable properties [Extract from Circular No. 5 of 1999 dated ]. 22. MOTOR VEHICLES CVT Following paragraph (C) omitted vide Finance Act, 2007: (C) Motor vehicles: * (I) (II) Capital Value Tax shall be payable on purchase of *[ ] vehicles, not previously used in Pakistan, at the following rates: Motor vehicle of an engine capacity: (i) (iii) (iv) not exceeding 800 cubic centimeters and three wheelers exceeding 800 cubic centimeters but Not exceeding 1000 cubic centimeters exceeding 1000 cubic centimeters but not exceeding 1300 cubic centimeters exceeding 1300 cubic centimeters but not exceeding 1600 cubic centimeters; and Nil 3.75% 5% 6.25% (v) exceeding 1600 cubic centimeters 7.5% * Word new omitted in cls. (II) & following cls. (I) omitted by the Finance Act, 1998: (I) Motor vehicles, excluding three wheelers and motor vehicles of engine capacity upto 800 c.c., previously used in Pakistan, where the period between the first registration and the date of any subsequent registration is, (i) less than 5 years; 1.5% 5 years or more but less than 10 years; and 0.5%

9 23 [(CA)] Omitted (iii) 10 years or more. Nil. Earlier paragraph (C) was substituted for the following vide Finance Act, 1997: (C) (I) Motor vehicles Motor vehicles, except three wheelers and those with engine capacity up to 800 cubic centimeters; (i) other than those previously used in Pakistan; 5% previously used in Pakistan, where the period between first registration and the date of any subsequent registration is (a) less than 5 years; 2.5% (b) 5 years or more than 10 years; and 1.25% (c) 10 years or more. Nil. (II) in addition to Capital Value Tax payable as above, a further amount of Capital Value Tax shall be payable on purchase of new cars, jeeps, double cabin pick-ups and station wagons, at the following rates: Motor vehicle of an engine capacity: in case of non-taxpayer in case of taxpayer. (i) not exceeding 1000 c.c. 2.5% ad val. Nil exceeding 1000 c.c. but not exceeding 1300 c.c. 5.0% ad val. 2% ad val. (iii) exceeding 1300 c.c. but not exceeding 1600 c.c. 7.5% ad val. 4% ad val. (iv) exceeding 1600 c.c. 10% ad val. 6% ad val. : Provided that the provisions of sub-section (5) granting exemption to taxpayers shall not be applicable in respect of such further Capital Value Tax payable under this paragraph. 23. IMMOVEABLE PROPERTIES LOCATED IN PROVINCES - In the Finance Act, 1989 (V of 1989), in section 7, in sub-section (2) paragraph (CA) omitted by the Finance Act, 2010 (XVI of 2010). Aforesaid amendment mentioned as section 5 of the Finance Act, 2010 (XVI of 2010), and it was not the part of proposals published thru Finance Bill AMENDMENT IN CAPITAL VALUE TAX LAW (Section 7 of Finance Act, 1989)

10 24 [(D)] Omitted 25 [(E) Purchase of modaraba certificates or any instrument of redeemable capital as defined in the Companies Ordinance, 1984 (XLVII of 1984), 26 [ ]. 27 [0.2]% of the purchase value.] Consequent upon amendment in the Federal Legislative List of the Constitution of Islamic Republic of Pakistan, through 18th Amendment, Federal Government is no more empowered to levy/collect Capital Value Tax on immoveable properties located in Provinces. Therefore, through an amendment in CVT Law, brought about through Finance Act 2010, capital value tax rates applicable on immoveable properties have been omitted. Consequently, capital value tax is no more chargeable under section 7 of the Finance Act, 1989 on immoveable properties with effect from [Extract from FBR Finance Act, 2010 Explanatory Circular No. 10/2010 (Income Tax) dated /C.No.ITP/B /EC-e-Dox # R signed by the Secretary (Income Tax Policy), Mr. Sajid Nazir Malik]. 24. FOREIGN TRAVEL AIR TICKETS CVT Following paragraph (D) omitted vide Finance Act, 2006: (D) Air ticket for foreign travel commencing from an airport in Pakistan except in the case of: (i) Diplomats; and Aircraft crew on duty. 1.5% of the value of the ticket. Hajj Tickets. Ministry of Religious Affairs, Zakat & Usher was normally exempted from payment of CVT on purchase of air tickets for the pilgrims performing Hajj. Earlier paragraph (D) was substituted for the following vide Finance Act, 1997: (D) Air ticket for foreign travel commencing from an airport in Pakistan except in the case of: 3% of the value of the ticket. (i) Diplomats; Aircraft crew on duty; and (iii) Dependent children (upto the age of 21 years) and spouse of the purchaser, if he is a National Tax Number Certificate or card holder. 25. SECURITIES Paragraph (E) added vide Finance Act, 2004 w.e.f PUBLIC COMPANY SHARES Words etc. or shares of a public company listed on a registered stock exchange in Pakistan omitted by the Finance Act, 2009 (I of 2009). 3. TAXATION ON PURCHASE OF SHARES.

11 (3) For the purposes of sub-section (1), the capital value of the asset shall be 28 [(a)] Omitted (b) in the case of a motor vehicle not plying for hire, which is (i) Imported 29 the landed cost as determined by the Customs authorities; Clarification. Previously, a registered stock exchange in Pakistan was obliged to collect 0.01%, on transactions w.e.f , of the purchase value of any modaraba certificates or any instrument of redeemable capital as defined in the Companies Ordinance, 1984 (XLVII of 1984), or shares of a public company listed on a registered stock exchange in Pakistan transacted through its automated trading system. CVT on shares traded on the Stock Exchanges has been withdrawn w.e.f [Extract from Paragraph 3 of FBR Circular No. 04 of 2009 dated / No.F.1(35)Ex/2009]. 27. CVT RATE Substituted for 0.01 by the Finance Act, DETERMINATION OF VALUE FOR CVT Following clause (a) [duly substituted by the Finance Act, 1997) omitted by the Finance Act, 1999: (a) in the case of immovable property, the value as specified in the standard valuation Tables of Immovable Properties or the value specified by the District Collector for the purposes of Stamp Duty or, where such value has not been determined, the value declared by the transferee: Provided that in case the property is let out, its value shall be adopted at ten times the sum for which it might reasonably be expected to be let out from year to year; Before substitution by the Finance Act, 1997, originally it was provided to read as follows, where word and at the end was omitted by the Finance Act, 1992: (a) in the case of immovable property, the value as determined for the purposes of Stamp-Duty or, where no Stamp-Duty is chargeable, the value declared by the transferee; [ ] 29. EXEMPTION Read with following SRO. 614 (I)/2007 dated as amended by SRO. 624 (I)/2007 dated to substitute from the 9 th June, 2007 for the words with immediate effect : SRO. 614 (I)/2007 dated In exercise of the powers conferred by sub-section (10) of section 7 of the Finance Act, 1989 (V of 1989), the Federal Government is pleased to exempt imported motor vehicles from payment of Capital Value Tax [from the 9 th June, 2007].

12 purchased from a manufacturer in Pakistan. the price paid by the purchaser; (iii) Others as declared by the transferee 30 [.] 31 [(c)] Omitted (4) The capital value tax shall be collected by the person responsible for registering or attesting the transfer of the asset in respect of which the tax is payable, at the time of registering or attesting the transfer 32 [:] 33 [Provided that in the case of motor vehicle 34 [ ] when purchased from a manufacturer in Pakistan, the capital value tax shall be collected by such manufacturer before making the delivery of the said vehicle 35 [:] ] 36 [2 nd Proviso] Omitted Clarification. CVT on import of motor vehicles has been withdrawn w.e.f [SRO. 624 (I)/2007 dated ] vide FBR Circular No. 2 dated Substituted for ; and by the Finance Act, Earlier the word etc. ; and was substituted for the full-stop by the Finance Act, SHARES VALUATION FOR CVT Following clause (c) [duly added by the Finance Act, 1992) omitted by the Finance Act, 1993: (c) in the case of shares, the cost of acquisition thereof. 32. Substituted for the full-stop by the Finance Act, COLLECTION OF CVT BY MANUFACTURER Proviso added by the Finance Act, HIRE Words plying for hire omitted by the Finance Act, Substituted for the full-stop by the Finance Act, IMPORTED MV CVT Following/second proviso (earlier added by the Finance Act, 1998) omitted by the Finance Act, 2011 (XVI of 2011): Provided further that the collector of customs shall in the case of every motor vehicle imported into Pakistan, at the time of customs clearance, collect capital value tax on the basis of the value of such vehicles as increased by the customs duty, sales tax, income tax and any other charges payable before removal from customs area, if any, levied

13 37 [Provided further that a registered Stock Exchange in Pakistan shall collect Capital Value Tax on the purchase value of modaraba certificates or any instrument of redeemable capital or shares of a public company from the resident persons] 38 [(5)] Omitted thereon, at the rates specified in clause II of *paragraph C of sub-section (2). EUS Note In the Finance Bill 2011, it was proposed to omit the following/third proviso: Provided further that a registered Stock Exchange in Pakistan shall collect Capital Value Tax on the purchase value of modaraba certificates or any instrument of redeemable capital or shares of a public company from the resident persons. Extract From: Notes on Clauses of the Finance Bill (NA Bill No. 16 of 2011 dated ) - Seeks to provide consequential changes to clause (1)(a) above. *Paragraph C of sub-section (2) was omitted by the FA, SECURITIES Third proviso added by the Finance Act, EUS Note. In paragraph (E), words etc. or shares of a public company listed on a registered stock exchange in Pakistan omitted by the Finance Act, 2009 (I of 2009). 38. ADJUSTABILITY TOWARDS WEALTH TAX Following sub-section (5) [duly substituted by the Finance Act, 1997) omitted by the Finance Act, 2004 w.e.f : (5) The amount of capital value tax paid by an individual, association of persons, firm or a company, borne on National Tax Number Register of the Wealth Tax Department shall be adjustable towards the wealth tax payable by such NTN holder for the assessment year corresponding to the financial year ending on the thirtieth day of June in which tax was paid and the two immediately succeeding assessment years, if any. Before substitution by the Finance Act, 1997, and after substituting certain words etc. for the word who by the Finance Act, 1990, omitting the Finance Act, 1993 inserted words and has paid income tax in respect of the assessment year immediately preceding the financial year in which any asset is acquired vide Finance Act, 1996, originally it was provided to read as follows:

14 (6) The proceeds of the tax collected under sub-section (4) shall be credited to the Federal Consolidated Fund under the head specified by the Federal Government. (7) Where the capital value tax is not collected from the person liable to pay it, the tax may be collected by an officer designated by the 39 [Central] Board of Revenue in this behalf from the said person, and the provisions of 40 [Part IV of Chapter X of Income Tax Ordinance, 2001 (XLIX of 2001)], shall, so far as may be, apply to the collection of the capital value tax as they apply to the collection of tax under the said 41 [Ordinance]. (8) Where any person fails to collect or having collected fails to pay 42 [ ] the capital value tax as required, he shall be personally liable to pay the tax 43 [alongwith additional tax at the rate of 15% per annum for the period for which such tax or part thereof remains unpaid]. (5) Nothing contained in this section shall apply to an individual [, an association of persons, a firm or a company which] is borne on national tax register of the Income Tax Department as an assessee as defined under the Income Tax Ordinance, 1979 (XXXI of 1979) [ ]. Further, following proviso was added in the afore-mentioned sub-section (5) vide Finance Act, 1992, where words etc. or (f) was substituted for, (f) or (g) by the Finance Act, 1993, and subsequently said proviso was omitted by the Finance Act, 1996: Provided that such individual, association of persons, firm or the company has not acquired any asset specified in clauses (b), (d) [or (f)] of sub-section (2). 39. FBR Here certain change may be expected with respect to Federal Board of Revenue. 40. COLLECTION & RECOVERY OF TAX Substituted for the words etc. section 32 of the Wealth Tax Act (XV of 1963) by the Finance Act, INCOME TAX ORDINANCE Subs. for the word Act by the Finance Act, COMMA omitted by the Finance Act, ADDITIONAL TAX Words etc. added by the Finance Act, 1997.

15 44 [(8A) The Commissioner of 45 [Income Tax], on an application by the assessee, may revise any order made under this section.] (9) The Central Board of Revenue may, by notification in the official Gazette, make provisions relating to the collection and recovery of, any other matter relating to the capital value tax. 46 [(10) The Federal Government may, by notification in the official Gazette, exempt any person or class of persons or asset or class of assets from the Capital Value Tax 47 [ ]; Provided that such exemption may be subject to such conditions as may be specified in the notification.] REVISION OF ANY ORDER Sub-section (8A) inserted by the Finance Act, CIT Subs. for the words Wealth Tax by the Finance Act, CVT EXEMPTION Sub-section (10) substituted for the following (duly added by the Finance Act, 1992, where and (e) was substituted for, (e) and (g) by the Finance Act, 1993] vide Finance Act, 1996: (10) The rate of capital value tax shall be (i) in the case of assets referred to in clauses (a), (b), (c) [and (e)] of sub-section (2). in the case of assets referred to in clause (d) of sub-section (2) 5% of the capital value 3% of the capital value (iii) in the case of assets referred to in clause (f) of sub-section (2), where the period between the date of first registration and the date of any subsequent registration is (a) less than five years. 2.5% of the capital value (b) five years or more but less than ten years. 1.25% of the capital value (c) ten years or more. Nil. 47. FURTHER CVT Words or any further Capital Value Tax payable thereon by him omitted by the Finance Act, CVT EXEMPTIONS - Data compiled under EUS Enclosures here.

16 Agricultural Land Audit 2. USEFUL REFERENCES Agricultural Land Audit Challan Form/Rules Computerization & Monitoring Exemptions Gift Governments Housing Societies/CVT Wing Leasing/Modaraba Vehicles Partner/Partnership Firm Power of attorney Provinces Powers Urban Area Land ** * ** CVT on Agricultural land/urban area land, Power of attorney, and Gift transactions etc. was earlier clarified under No.F.4(1)ITP/2006-CVT on , and & The FBR had decided to initiate audit of buyers who have made huge investments in expensive immoveable assets to check the evasion of CVT. According to the latest statistics released by the income tax department, around people did not pay CVT amounting to millions payable on transfer of immoveable properties. The relevant figures, obtained from registering authorities, are being shifted to computerized data bank, being used for broadening the tax base and for probing the source of investment made in the properties purchased. CVT collection in the district increased from Rs. 50 million in March, 2009 to Rs million in May, 2009 as a result of a strict monitoring by the RTO. Around 20 teams, which visit the registrar office and ensure that CVT is being paid in accordance with the law, have been constituted. Monitoring teams have also been constituted for the districts of Kasur, Sheikhupura, Nankana & Okara (Punjab). The income tax department may issue legal notices to the buyers indulging in tax

17 evasion. At present, 9 towns of Lahore district, and 106 housing societies including DHA and LDA are engaged in transfer of immoveable properties and as per the law, transfer of immoveable assets is considered illegal until and unless the buyer does not pay the CVT (Published during third week of June, 2009). Challan Form/Rules Form CVT-1 Application to the Registration Authority for the purchase of Immovable Property substituted vide SRO. 416 (I)/2009 dated [Gaz./p. 1513], available at FBR website. New CVT Challan Form requires to obtain complete information about buyers and sellers of property for broadening the tax base. A computer program has been devised to automatically workout the CVT on property taking into account the type, size and location of property as per law. The FBR issued new form on property transactions to introduce the system of Computerized Payment Receipt (CPR) by banks. The purchasers of the immovable property, including commercial and residential property of specified sizes within urban areas, are required to deposit the CVT under this new form. The purchaser would complete the basic information under new CVT form, take the CVT form to the concerned registration authority for valuation of the property for CVT purposes, deposit the amount in the relevant bank where bank staff would feed particulars in system for issuance of the CPR and the purchaser would submit the copy of CPR alongwith CVT form to the registration authority (as published during first week of September, 2009). Prescribed Forms & Statements/CVT-1 & CVT-2 are discussed under Chapter-IV/Rule 11 of the CVT Rules, 1990, where rule 11 was inserted by SRO. 495 (I)/93 dated w.e.f Subsequently it was substituted vide SRO. 572 (I)/96 dated and again by SRO. 99 (I)/97 dated CVT Rules, 1990 were earlier notified vide SRO. 741 (I)/90 dated [supersession of SRO. 755 (I)/89 dated ], and amended from time to time inclusive of thru SROs. 362 (I)/92 dated , 495 (I)/93 dated w.e.f , 572 (I)/96 dated , 99 (I)/97 dated , 731 (I)/2005 dated , 1128 (I)/2007 dated , and SRO. 416 (I)/2009 dated

18 Taxation Officer - The Taxation Officer to be read for Taxation Officer of Wealth Tax wherever occurring and for Deputy Commissioner of Wealth Tax occurring twice in CVT rules 10 (Payment of refund) and 13 (Coordination) respectively as amended/corrected through SRO (I)/2007 dated Computerization & Monitoring The FBR is all set to post its income tax officials at all the subregistrars offices to monitor CVT collection at source for manifold increase in the CVT collection. For this purpose, the income tax officials may be deployed at the collection points of CVT. There are 26 sub-registrars located at 7 different places of Karachi including Malir, West Site, Gulshan-e-Iqbal, Nazimabad, City Station and Clifton. PRAL would assist the department by managing resources comprising hardware and software to capture the data at the time of transfer of property, which would simultaneously be uploaded on the FBR web portal. The CVT kiosks would also be established to facilitate taxpayers with regard to verification of NTN besides disseminating information to the officers having the same jurisdiction. The level of monitoring would be expanded to all related authorities including DHA, KDA, MDA and LDA. They said CVT system would be installed at all registrar offices and provincial motor vehicle registration department to assess CVT on every transaction. The system, which is a complete online solution, would also be installed at all the utility offices including KESC and SSGC to determine the capacity of individual or a company of paying taxes and to improve data processing of CVT on immovable and movable assets across the country. The CVT application and recorded data is completely secure and would only be accessed by RTOs and the FBR thru an online environment, which would be controlled via middleware control centre software for monitoring and controlling all the transactions. Moreover, the software would automatically deduct CVT in all transactions of the registered and non-registered buyers and sellers and would process on regional basis (As published during last week of October, 2009). The FBR may computerize property records for verification of CVT as one of the initiatives taken for broadening the tax-base, due to launching certain pilot project for computerization of CVT data. Accordingly, the instructions may be issued to the DGs of LTUs &

19 the RTOs to obtain property data from their relevant development authorities for proper monitoring of CVT on immovable property. Further, the effective enforcement of filing of monthly statement on property transfer would help in obtaining data on property registration, including name, CNIC, address and NTN of the buyer/seller, full particulars/location of property and its value as per the registration deed (as published during first week of February, 2009). Exemptions Data compiled under EUS Enclosures here. Gift CVT on Agricultural land/urban area land, Power of attorney, and Gift transactions etc. was earlier clarified under No.F.4(1)ITP/2006-CVT on , and & Governments Federal Government The federal Government is not included in the list of persons who are liable to pay CVT on the purchase of assets, its assets are exempt from the levy of CVT vide CBR letter F.No. 2(1)WT/94 dated Provincial Government As per law, CVT is payable by a company as defined under section 2(16) of the Income Tax Ordinance, 1979, which includes a Provincial Government. However, as clarified by Law Division Article 165 of the Constitution provides immunity from taxation Government Property. Hence the assets/properties purchased by a Provincial Government are not liable to CVT vide CBR letters C.No. 2(1)WT/94 dated & Housing Societies/CVT Wing During Budgetary Measures , it was estimated to collect an amount of Rs. 3 billion from CVT on immovable property. The FBR is making serious efforts to improve collection from the CVT on the immovable property/by the housing societies and may establish a separate CVT Wing in the field formations to exclusively deal with the monitoring and collection of the CVT, which is on the acquisition

20 of immovable property and is levied on its value as recorded in mutation deed, registered deed, or power of attorney. The recorded value is mainly based on the valuation rates fixed by Provincial Governments for the purpose of collection of stamp duty. The FBR has directed the LTUs to check non-payment of CVT on buying and selling of property by housing/development societies. The board would also examine the possibility to charge CVT on transaction value instead of recorded value of immovable assets. The housing societies come within the definition of companies. The society could be a private limited company, trust or co-operative society. The LTUs have the authority to obtain data from the housing societies for proper collection of the CVT on buying and selling of property. The law has also made it obligatory on every person registering or attesting the transfer of immovable property to furnish information on names, addresses & NTNs of the sellers and buyers besides complete description of the property and value for which the property is transferred. (As published during February, 2009). Leasing/Madaraba Vehicles Determination of capital value/cvt for the purchasers of used MVs to whom these vehicles were leased by leasing companies/modarabas, concession extracted from clarification vide Circular No. 17 of 1993 dated , read as follows: The original cost of acquisition declared at the time of first registration in Pakistan, of the vehicles by the selling companies (lessors), as reduced by an amount equal to 10% of the said value for each calendar year elapsed since the first registration. Pakistan Domestic Sukuk Co. Ltd. M/s. Pakistan Domestic Sukuk Co. Ltd. exempted from the payment of CVT on purchase of immoveable property comprised in or forming part of Jinnah International Airport Karachi owned by CAA vide SRO. 492 (I)/2010 dated [C. No.2(3)INC/2007-CVT signed by the Member Policy (Direct Taxes)/Additional Secretary, Mr. Asrar Raouf]. Partner/Partnership Firm

21 Payment of tax by a firm does not entitle a partner to exemption from CVT vide CBR letter C.No. 2(6)WT/93-Vol.II/(Pt.I) dated Adjustment of refund of a firm against tax liability of a partner amounts to payment of tax for CVT purpose vide CBR letter C.No. 2(1)CVT/91 dated The case of a partner of a registered firm (having no other source of income) where no tax from such share income is payable being exempt under 49 [clause (111A)] of Part-I of the Second Schedule to the Income Tax Ordinance, 1979, does not qualify for CVT exemption and cases where no income tax has been paid in respect of assessment year in which any asset is purchased, does not qualify for CVT exemption vide CBR letter C.No. 2(1)CVT/96 dated Power of attorney CVT on Agricultural land/urban area land, Power of attorney, and Gift transactions etc. was earlier clarified under No.F.4(1)ITP/2006-CVT on , and & Provinces Powers The FBR has no authority to collect 4% CVT on transactions of immovable property, up to one kanal, from as a result of 18th Constitutional amendment under which imposition of CVT now falls into provincial domain. It is the right of the provinces to decide ultimate fate of this tax. 49. CERTAIN CONTRACTORS, IMPORTERS & EXPORTERS (80C/80CC) Following clause (111A) of Part-I of the Second Schedule to the Income Tax Ordinance, 1979 was inserted by SRO. 679 (I)/91 dated and amended to insert the reference of section 80CC vide Finance Act, 1992, and to add proviso vide Finance Ordinance, 2002: (111A) Any sum being the share of the assessee (or any portion thereof) in such profits and gains of a registered firm as are liable to be assessed under the provisions of section 80C [or section 80CC] [:] [Provided that exemption under this clause shall not apply in respect of any assessment year commencing on or after the first day of July, 2003.]

22 The Registrar of Revenue Department and Vehicle Registration Authorities of provincial governments are bound, under the law, to furnish details of land transaction as well as total registered vehicles before the FBR authorities on quarterly basis that would enable the tax authorities to undertake actions against tax evaders. The FBR had collected Rs 2.5 billion from 4% CVT on land transaction during ten months (July-April) period of current fiscal year; so the cost of abolishing this tax would be hovering around the same level. The revenue collection declined after doubling the rate of taxation on land transaction in the shape of CVT to 4% from earlier 2% during the current fiscal year. The FBR had envisaged tax collection of Rs 15 billion with imposition of 4% CVT on land transaction in compared to collection of around Rs 3.5 billion in with 2% CVT. However, collection stood at Rs 2.5 billion during current fiscal year, reflecting massive under-declaration (as published during first week of June 2010 with reference to the relevant Member FBR). Urban Area Land CVT on Agricultural land/urban area land, Power of attorney, and Gift transactions etc. was earlier clarified under No.F.4(1)ITP/2006-CVT on , and & ** * **

23 EUS Enclosure to EUS MICU CVT Levy & Exemptions CVT EXEMPTIONS VEHICLES Import. Read with following SRO. 614 (I)/2007 dated as amended by SRO. 614 (I)/2007 dated to substitute from the 9 th June, 2007 for the words with immediate effect : SRO. 614 (I)/2007 dated In exercise of the powers conferred by sub-section (10) of section 7 of the Finance Act, 1989 (V of 1989), the Federal Government is pleased to exempt imported motor vehicles from payment of Capital Value Tax [from the 9 th June, 2007]. CVT specified rates payable on purchase of motor vehicles, not previously used in Pakistan were provided under clause (II) of Paragraph (C) of section 7(2) of the Finance Act, 1989 (V of 1989), which had been omitted by the Finance Act, 2007 (IV of 2007). Old & used motor vehicles import (omission of CVT exemption) read under EUS MICU Customs Duty Exemptions [SRO. 932 (I)/2004 dated which was subsequently superseded by SRO. 577 (I)/2005 dated ]. Further, read with following notification: SRO. 977 (I)/2004 dated In exercise of the powers conferred by sub-section (10) of section 7 of the Finance Act, 1989 (V of 1989), the Federal Government is pleased to direct that in case of old and used vehicles imported and assessed under *Customs General Order No. 10 of 2004, the amount of Capital Value Tax shall in any case not exceed the following amount, namely: from 801CC to 1000CC Rs. 22,854 from 1001CC to 1300CC Rs. 59,433 from 1301CC to 1600CC Rs. 1,16,004 from 1601CC to 1800CC Rs. 1,59,338 * CGO No. 10/2004 superseded by CGO No. 14/2005 dt

24 Foreign Exchange. CD paid in forex imported vehicles (87.03) were exempted from CVT w. e. f vide SRO. 669 (I)/99 dated Hire. Motor vehicles plying for hire were exempted from charge of CVT vide SRO. 648 (I)/96 dated Manufacture. Jeeps manufactured in Pakistan exempted from CVT vide SRO. 226 (I)/2000 dated New Cars sold by a manufacturer on or after exempted from CVT vide SRO. 114 (I)/98 dated [supersession of SRO. 43 (I)/98 dated ] with the condition that CVT already paid shall not be refunded. Further, NTN CVT rule 4(1) non-applicability was notified under said SRO. 114 (I)/98. Tractors used for agricultural purposes exempted from CVT vide SRO. 472 (I)/97 dated NRI Scheme. CBU passenger bus imported under Non Repatriable Investment (NRI) Scheme exempted from CVT w. e. f vide SRO. 670 (I)/99 dated Social. Purchase of specified motor vehicles by voluntary social welfare agencies registered under the Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961 (XLVI of 1961)/the entities approved under Income Tax Ordinance for such purposes, against foreign grants, are conditionally exempted from CVT vide SRO. 508 (I)/98 dated PROPERTY Canadian High Commission, Islamabad - CVT on registration/transfer of plot measuring 27,346 Square Yards (5.65 acres) bearing No. 126-A, Sector G-5, Diplomatic Enclaves, Islamabad purchased by the Canadian High Commission, Islamabad, exempted vide SRO. 369 (I)/2010 dated [C.No.1(8)Ex/2010 signed by the Member Policy (Direct Taxes)/Additional Secretary/Gaz./p. 1189].

25 Saudi Consulate, Karachi - CVT on purchase of plot No. 127, 30 th Street, 126, Saba Avenue, 129, 30 th Street, 128/I-II each property measuring 2000 Sq yds, at Saba Avenue Phase VIII, DHA Karachi, by the Government of Saudi Arabia thru Saudi Consulate, Karachi for official use, exempted vide SRO. 73 (I)/2009 dated [Gaz./p. 175]. M/s. Pakistan Domestic Sukuk Company Ltd. exempted from CVT on the purchase of immovable property identified as Faisalabad Pindi Bhattian Motorway (M-3) owned by National Highway Authority (NHA) vide SRO. 484 (I)/2008 dated [Gaz./p. 1323]. Mr. Muhammad Yousuf S/o Gulzar Muhammad exempted from payment of CVT on transfer of House on Plot No. 346 measuring 60 x 100, Sector F/11, Islamabad vide SRO. 403 (I)/2008 dated [Gaz./p. 1133]. Specified vehicles or properties transfer in the name of specific national/multi-national entities are exempted from CVT under section 7(10) of the Finance Act, 1989 (V of 1989) subject to certain conditions/for certain purposes, which are notified in the official Gazette from time to time since 1989.

26 EUS Enclosure to EUS MICU CVT Levy & Exemptions IMMOVABLE PROPERTIES PARAGRAPH (CA) BEFORE OMISSION FINANCE ACT, 2010 (XVI of 2010) Section 5 read as follows: 5. Amendment of Finance Act, 1989 (V of 1989). In the Finance Act, 1989 (V of 1989), in section 7, in sub-section (2) paragraph (CA) shall be omitted. Finance Bill Aforesaid amendment mentioned as section 5 of the Finance Act, 2010 (XVI of 2010), and it was not the part of proposals published thru Finance Bill FBR EXPLANATION AMENDMENT IN CAPITAL VALUE TAX LAW (Section 7 of Finance Act, 1989) Consequent upon amendment in the Federal Legislative List of the Constitution of Islamic Republic of Pakistan, through 18th Amendment, Federal Government is no more empowered to levy/collect Capital Value Tax on immoveable properties located in Provinces. Therefore, through an amendment in CVT Law, brought about through Finance Act 2010, capital value tax rates applicable on immoveable properties have been omitted. Consequently, capital value tax is no more chargeable under section 7 of the Finance Act, 1989 on immoveable properties with effect from [Extract from FBR Finance Act, 2010 Explanatory Circular No. 10/2010 (Income Tax) dated /C.No.ITP/B /ECe-Dox # R signed by the Secretary (Income Tax Policy), Mr. Sajid Nazir Malik] ** * ** PARAGRAPH (CA) BEFORE OMISSION BY THE FINANCE ACT, 2010 (XVI of 2010) READ AS FOLLOWS:

27 50 [(CA) 51 (a) Residential immovable property, (other than flats), 50. IMMOVABLE PROPERTIES CVT Paragraph (CA) substituted for the following (duly inserted by the Finance Act, 2006) vide Finance Act, 2009 (I of 2009): (CA) (a) (b) (c) Immovable property, (other than commercial property residential flats), situated in urban area, measuring at least one kanal or 500 square yards whichever is less, (i) Where the value of immovable property is recorded. Where the value of immovable property is not recorded 2% of the recorded value. Rs. 50 per square yard of the land area; Commercial immovable property of any size situated in urban area. (i) Where the value of immovable property is recorded. Where the value of immovable property is not recorded 2% of the recorded value. Rs. 50 per square yard of the land area. Residential flats with covered areas measuring 1500 sq. feet and above. (i) Where the value of immovable property is recorded. 2% of the recorded value. Where the value of immovable Rs. 100 per square yard of the property is not recorded. land area. 51. RATES OF CVT FOR IMMOVABLE PROPERTY: Clarification. Paragraph (CA) of section 7(2) has been substituted with new paragraph (CA) to prescribe the rates of CVT leviable on immovable property w.e.f vide Paragraph 2 of FBR Circular No. 04 of 2009 dated Several representations have been received in the Board wherein it has been pointed out that CVT rates for immovable property given in subparagraph (CA)(a), (b) and (c) of paragraph 2 in the subject circular [No. 04 of 2009 dated ] are ambiguous hence not easy to understand. Therefore, in order to clarify the relevant provisions of CVT Law regarding applicability of tax rates, sub-paragraph (CA)(a), (b) and (c) as redrafted, are given as under for convenience vide FBR Circular No. 05 of 2009 dated [notified as Corrigendum to Circular No. 4 of 2009]: (a) (CA) Residential immovable property, (other than flats), situated in urban area, measuring at least 500 square yards or one kanal (whichever is less) and more, (i) Where the value of immovable property is recorded - 4% of the recorded value Or Where the value of immovable property is not recorded Rs. 100 per square yard of the landed area

28 situated in urban area, measuring at least 500 square yards or one kanal (whichever is less) and more, (i) Where the value of immovable property is recorded. 4% of the recorded value. Which ever is higher Where the value of immovable property is not recorded Rs. 100 per square yard of the landed area (iii) Where the immovable property is a constructed property. Rs. 10 per square feet of the constructed area in addition to the value worked out above. (b) Commercial immovable property of any size situated Higher of the value of (i) & above has to be adopted. (iii) Where the immovable property is a constructed Rs. 10 per square feet of the constructed area in addition to the value worked out above. (b) Commercial immovable property of any size situated in urban area. (i) Where the value of Immovable property is recorded - 4% of the recorded value. Or Where the value of immovable property is not recorded Rs. 100 per square feet of the landed area. Higher of the value of (i) & above has to be adopted. (iii) Where the immovable property is a constructed Rs. 10 per square feet of the constructed area in addition to the value worked out above. (c) Residential flats. (i) Where the value of Immovable property is recorded - 4% of the recorded value. Or Where the value of immovable property is not recorded Rs.100 per square feet of the covered area Higher of the value of (i) & above has to be adopted.